Bill Discounting Facility: Unlock Cash Flow Without Waiting for Payments

Many businesses face cash flow challenges due to pending invoices. Bill discounting offers a solution by allowing businesses to get immediate funds against their unpaid invoices instead of waiting for clients to clear payments. This facility helps maintain liquidity without adding loan liabilities.

What is Bill Discounting?

Bill discounting is a financing arrangement where a business sells its unpaid invoices (bills) to a bank or Non-Banking Financial Company (NBFC) at a discounted rate. The financier provides immediate cash to the business and later collects the full payment from the buyer when the bill matures.

Example of Bill Discounting:

• A business has an invoice worth ₹10 lakh, payable in 60 days.

• The business approaches a bank, which advances 90% of the invoice amount after deducting a small discount.

• Instead of waiting for 60 days, the business receives instant funds to continue operations smoothly.

Types of Bill Discounting

1. Trade Bill Discounting

• Businesses get funds against bills raised for the sale of goods or services.

2. Invoice Discounting

• Businesses use unpaid invoices as collateral to access immediate working capital.

3. LC (Letter of Credit) Discounting

• Exporters receive funds against letters of credit issued by the buyer’s bank, ensuring liquidity.

4. Supply Chain Financing

• Large corporations and MSMEs discount their bills through banks or NBFCs to maintain smooth cash flow.

Benefits of Bill Discounting for Businesses

1. Faster Cash Flow

• Businesses receive immediate funds instead of waiting for payments from buyers.

2. No Collateral Requirement

• Unlike traditional loans, bill discounting does not require property or assets as security.

3. Better Working Capital Management

• Helps businesses avoid cash flow shortages and meet operational expenses on time.

4. No Additional Loan Burden

• Bill discounting does not increase liabilities like conventional loans, keeping financial records healthier.

5. Flexible Repayment

• The financier collects payment directly from the buyer when the invoice matures, reducing repayment hassles.

Who Can Avail Bill Discounting?

• MSMEs, traders, and manufacturers supplying goods or services on credit.

• Exporters and businesses engaged in international trade.

• Businesses with long credit cycles ranging from 30 to 90 days.

How to Apply for Bill Discounting?

Step 1: Submit your unpaid invoice or bill to a bank or NBFC.

Step 2: The financier verifies the invoice authenticity and assesses the buyer’s creditworthiness.

Step 3: The bank or NBFC advances 80-90% of the invoice value after applying a discount.

Step 4: Once the buyer makes the payment, the financier deducts fees and releases the remaining amount.

Why Choose Bill Discounting Over a Loan?

• No need to pledge property or assets as collateral.

• Quick access to working capital without increasing debt.

• Ideal for MSMEs and businesses with long payment cycles.

Bill discounting is an efficient way to manage cash flow, ensuring businesses do not face liquidity issues while waiting for payments. By leveraging unpaid invoices, companies can maintain smooth operations without relying on traditional loans.